EU fines Microsoft $732 million over browser ballot debacle

European Union antitrust officials today hit Microsoft with a $732 million fine for failing to live up to a 2009 settlement that requires it to offer Windows users a choice of alternate browsers.

The announcement made by Joaquin Almunia, the European Commission's top antitrust regulator, had been expected after the New York Times reported Tuesday that a "large fine" was imminent in the eight-month-old case.

It was the first time that Europe's regulators had punished a company for shirking an antitrust agreement, something Almunia noted last year and again today.

"This is the first time we have seen a breach of a legally binding commitment," said Almunia during a Wednesday press conference from Brussels. "This is, of course, serious, whether it was intentional or not."

The settlement reached in late 2009 stemmed form a complaint by Norwegian browser maker Opera Software, which two years earlier accused Microsoft of manipulating the battle for browser share by tying Internet Explorer (IE) to Windows. After some arm twisting, including a threat to delay the then-upcoming Windows 7, Microsoft agreed to show European users of its Windows operating system a "browser ballot," a screen that displayed download links to rivals' browsers, including Google's Chrome, Mozilla's Firefox and Opera's namesake.

But Microsoft made a big mistake: It failed to display the browser ballot to users of Windows 7 Service Pack 1 (SP1) for some 14 months, from May 2011 until July 2012. Approximately 15.3 million users did not see the ballot as they should have, said Almunia.

In October 2012, Almunia filed formal charges against Microsoft, saying, "If companies enter into commitments, they must do what they have committed to do or face the consequences."

He said much of the same again today. "It goes without saying, that settlements can only work if the commitments are scrupulously complied with," said Almunia. "They must do what they have committed to or face the consequences."

Microsoft was to provide the ballot for five years—through the end of 2014—but last summer it offered to extend the time it is obligated to show the screen by 15 months.

Last fall Microsoft updated its newest operating system, Windows 8, to include the choice screen for EU customers. But at the same time the Commission also gave Microsoft a pass: It decided that Microsoft does not have to open Windows RT, the limited version built for tablets, to rivals' browsers.

The $732 million fine, equivalent to 561 million euros, was much smaller than the maximum—it could have been as high as $7.9 billion—and smaller, too, than some had argued should be applied.

"We took into account the infringement, the gravity of the infringement and the mitigating circumstances, the cooperation from Microsoft," explained Almunia when asked how the Commission calculated the fine. "Microsoft cooperated with us with information that helped in our investigation."

When pressed to explain how no one at either Microsoft or the Commission noticed that the ballot was missing for over a year—something one expert Tuesday found inexplicable—Almunia acknowledged that the company was monitoring itself.

"We trusted in the reports on the compliance [from Microsoft]," said Almunia. "We were not trying to explore Windows Service Pack 1. But maybe we should have tried to complement their reports."

Almunia hinted that Microsoft would no longer be monitoring itself.

In fact, Microsoft itself not only reported that all was working as it should as late as December 2011—deep into the time the ballot was absent—but its support personnel knew of the problem months earlier.

In March 2011, after Windows SP1's release but before the start of the infringement according to Almunia's timeline, a user reported the omission on Microsoft's own support forum. After some cursory back-and-forth between the user and a company support engineer, the latter ignored the former's continuing questions.

The missing ballot generated fallout other than the $732 million fine of today. Last year, before his ouster from Microsoft, the bonus of then-Windows chief Stephen Sinofsky was reduced by 40% because of what the company's board said was a failure "to provide a browser choice screen on certain Windows PCs in Europe as required by its 2009 commitment with the European Commission."

Microsoft did not comment today on the size of the fine, but issued a statement that reiterated what it had said several times since July 2012.

"We take full responsibility for the technical error that caused this problem and have apologized for it," the company said. "We provided the Commission with a complete and candid assessment of the situation, and we have taken steps to strengthen our software development and other processes to help avoid this mistake—or anything similar—in the future."